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Three generations, three views of retirement
LOS ANGELES (5/19/14)--When credit unions help their members with retirement planning, they must be ready for vastly disparate expectations based on their members' differences, according to research from Transamerica Center for Retirement Studies (TCRS).
The 15th annual Transamerica Retirement Survey, one of the largest and longest-running national surveys of its kind, examines current trends among American workers and compares the retirement outlooks of baby boomers, Generation X and millennials.
Baby boomers (born between 1946 and 1964) are proving that working in retirement and taking time for leisure are not mutually exclusive. Many baby boomers were already mid-career when the retirement landscape shifted from defined benefit plans to 401(k) or similar plans. They have not had a full 40-year time horizon to save in 401(k)s and experience the full effects of long-term compounding of their investments.
"Many baby boomers were hit hard during the Great Recession and, unlike younger generations, they have less time to financially recover before they retire," said Catherine Collinson, TCRS president.
TCRS found baby boomers to have total household retirement savings of $127,000 (estimated median), an increase from $75,000 in 2007, however, not enough to meet retirement needs for many.
This savings shortfall helps to explain the sharp increase in baby boomers who expect to rely on Social Security as their primary form of income when they retire--now 36%, up from 26% in 2007.
Sixty-five percent of baby boomers plan to work past age 65 or do not plan to retire. Fifty-two percent expect to continue working, with 42% working on part-time basis when they do retire. Only 21% plan to immediately stop working when they retire. Most of those who plan to continue working say it's for income or health benefits.
Generation X (born between 1965 and 1978) entered the workforce in the mid- to late 1980s just as 401(k)s were being implemented and defined-benefit plans were beginning to disappear. It is the first generation to have access to 401(k)s for most of its working careers.
"Generation X is the 401(k) generation," said Collinson. The survey found that among Generation Xers:
  • More than half (52%) expect to self-fund their retirement with 401(k)s, 403(b)s or IRAs;
  • Ninety-one percent highly value 401(k) or similar plans as an important benefit; and
  • Among those offered a plan, 84% participate in the plan, and participants contribute 7% (median) of their annual salary.
Millennials (born after 1978) have lofty aspirations about their future retirement. The majority (60%) plans to retire either before or at age 65. Most plan to continue working when they retire; many simply for enjoyment.
"Millennials are a digital do-it-yourself generation of super savers," said Collinson.  "They've heard and responded to the message they need to start early and save as much as possible." The survey found that 70% of millennials are already saving for retirement and started at median age of 22.
Two of three (66%) Millennials expect to self-fund their retirement through retirement accounts--401(k)s, 403(b)s and IRAs--or other types of savings and investments. Among millennials who are offered a 401(k) or similar plan, 71% are participating and contribute a median of 8% of their annual salary. Even more impressive, among millennials currently participating in their plan whose employer offers a matching contribution to the plan, the salary contribution rate increases to a median of 10%.

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